Morgan Stanley secondaries fund raises $370m

For the first time, investors in private equity real estate are turning to the secondaries market, according to Joseph Stecher, CIO of the bank's real estate fund of funds.

Morgan Stanley Alternative Investment Partners has raised $370 million for its latest secondaries vehicle – 30 percent more than its original target.

The funds of funds arm of the New York-based bank said Morgan Stanley AIP Phoenix Global Real Estate Secondaries had originally targeted $250 million, but that investor appetite for secondaries deal had resulted in an over-subscription.

“For the first time ever, investors in private equity real estate funds are selling significant interests in the secondary market, and as a result, we are finding tremendous opportunities to acquire high quality assets at attractive valuations,” said Joseph Stecher, head and chief investment officer of AIP real estate fund of funds.

The Morgan Stanley fund will target fund interests in global property vehicles with capital commitments of between $400 million and $800 million, with typical deal sizes around $20 million.

In the wake of the credit crisis, many GPs, as well as LPs, saw secondaries as an attractive investment opportunity as large numbers of private equity real estate investors sought to boost their liquidity. However, large bid-ask spreads meant many LPs refused to sell their interests. Market professionals though have told PEO's sister web site PERE this is changing.

Harvard Management Company, which oversees the Harvard University endowment, is currently marketing $500 million of real estate assets from its $5 billion portfolio, according to the Wall Street Journal

San Francisco-based Liquid Realty Partners is also raising equity for what could be the industry's largest private equity real estate secondaries fund ever. The firm is believed to be targeting $800 million for its fifth vehicle, LRP V. Simsbury, Connecticut-based Landmark Partners is also targeting $750 million for its latest vehicle, Landmark Real Estate Fund VI.